- China’s new yuan loans jumped to 1.36 trillion yuan in August, much higher than the 345 billion yuan in the previous month.
- Optimism about China’s prospects is growing as stimulus appears to be spreading across the economy
- The dollar posts its biggest fall in two months as the yen and yuan gain
The big risk aversion trade over the summer has seen AUD/JPY consolidate around the 94.00 level. A poor outlook for China kept the Australian dollar strong, while the resilience of the US economy kept the yen weaker due to a widening interest rate differential. The AUD/JPY daily highlights a global growth picture that awaits either a Chinese recovery, which should support Australia’s growth momentum, or a Japanese recovery, which is not on solid footing.
The AUD/JPY daily price shows a symmetrical triangle showing that the price has approached the 94.00 area. The uptrend that began in the spring ended in mid-June before the 97.70 level. Price is poised to either continue the longer-term uptrend that began after the pandemic low in March 2020 or potentially show the beginning of a significant bearish reversal.
The Australian dollar and Japanese yen appear to remain a key risk barometer, meaning they could react strongly to the direction of this week’s US inflation data, as well as China’s decision on interest rates and their activity data. Should an upward move emerge, the price could initially target the 95.50 area, while downside support would come from the 200-day SMA level, currently at 92.00.
This week’s Australian economic calendar is full of economic data that could overshadow anything happening from the US and China. The main Australian data release of the week concerns Australian jobs, which could point to a rebound in job growth but is unlikely to trigger renewed rate hike expectations for the RBA.
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